An Istanbul-based payments startup says it has signed a deal that smoothes the way for companies seeking to follow it into Iran’s $400 billion economy.

Iyzico’s agreement with Tehran-based electronic payments platform Parsian E-Commerce Company (PECCO) lets its customers process transactions from some 230 million payment cards that were until recently disconnected from any financial system outside Iran, according to Barbaros Ozbugutu, Iyzico’s German-Turkish chief executive. The deal is the first of its kind, he said in an interview with Bloomberg in Istanbul.

Parsian E-Commerce Company (PECCO) is a major affiliate of Parsian Financial Group. The company was established in 2000 as the first Payment Service Provider (PSP) in Iran.

Since visiting Tehran last year, the founders of the World Bank-backed company have been working on expanding there, Ozbugutu said. That gives them a foothold in a country that has been so far untapped by US-based competitors Paypal Holdings Inc. and Stripe Inc.

“We’re fulfilling the role Paypal was providing in places like Germany, where they were the preferred provider during that country’s digitalization phase,” Ozbugutu said of Iyzico’s home market.

It made sense to expand to Iran because there are “two major markets in the region with high card penetration, and they’re Iran and Turkey,” he said. “Both have populations of 80 million, a very young population and quite high Internet penetration.”

Sanctions Dismantled

While PayPal’s website says it’s active in more than 200 markets, Iran isn’t one of them. San Francisco-based Stripe also says it doesn’t support transactions in the Iranian rial.

Iyzico signed the deal after restrictions excluding Iran from the SWIFT banking system began to be dismantled as part of an agreement over its nuclear program which came into effect on Jan. 16.

In Iran all banks are integrated into one unitary clearance system, called SHETAB, which means Iyzico’s clients can sell to any card holder in the nation without establishing relationships with individual Iranian banks, Ozbugutu said.

Iyzico last year raised $6.2 million in a round led by the International Finance Corporation, or IFC, the investing arm of the World Bank. Its customers in Turkey include BMW, Allianz and online marketplace

Currently, 12 authorized Payment Service Providers (PSP) are active in Iran’s e-payment industry with more than 4 million active terminals. SHETAB, the Iranian interbank network with about 30-35 million users, hosts about 200 million transactions every day.

Paypal agreed to pay $7.7 million in March 2015 to settle charges by the US Treasury Department that it violated numerous sanctions programs against countries that included Iran. Although most of the financial sanctions against Iran have been lifted, restrictions on the US dollar transactions remain in place, discouraging many American companies to start business with Iran.

Source » financialtribune